Fitch: Homeowners insurers to see improved 2023 results on premium growth

U.S. homeowners’ insurance is poised to post a statutory underwriting loss for 2022 reported results, as insurers continue to face above-average catastrophe losses and claims cost uncertainty from persistently high inflation and heightened macroeconomic volatility, Fitch Ratings says. However, further material rate increases in most jurisdictions support strong premium growth in 2023, with segment results likely to improve going forward.

Nonetheless, uncertainty related to catastrophe experience and claims severity patterns may inhibit a near-term return to an underwriting profit. We anticipate the property/casualty industry will post a statutory underwriting loss in homeowners for the year, with a segment combined ratio projected at 105%. The segment combined ratio exceeded 100% for five of the last six years.

Volatility in performance continues to hinge on catastrophe loss experience; larger underwriters benefit from capabilities in managing catastrophe exposures and risk aggregations, and garnering efficiency from technology investments.

Aon’s recent catastrophe report estimates insured catastrophe losses in the U.S. exceeded historical averages at $99 billion in 2022, the third consecutive year that losses exceeded $90 billion. Insured losses from Hurricane Ian may ultimately represent approximately half of all 2022 catastrophe losses. Additional U.S. events with insured losses in excess of $1 billion in 2022 include multiple inland storms, and wildfire and drought in western states.

Given the more fragile economic environment homeowners’ writers will need to renew focus on several areas including: insuring properties to value under unique housing and construction market conditions, factoring inflation and tight labor market conditions in pricing and claims estimation and utilizing information technology to boost operating efficiency and customer experience in the application and claims process.

Ongoing underwriting changes and premium rate increases position the homeowners’ market for continued revenue growth in 2023 and a return to approaching a break-even underwriting result, barring further unusually high catastrophe losses. Segment net written premiums increased by approximately 10% in 2022 to $114 billion. High single-digit premium growth is likely to continue through 2023.